Traditionally income-tax levies Minimum Alternate Tax on company
who discloses profits but after considering incentives and higher rate of
depreciation has no or lower taxable income. Last year for the first time similar
provisions were extended to non-corporate tax payer i.e. LLPs. In order to
hoard erosion of tax base and widen tax base vis-à-vis profit linked
deductions, Finance Bill 2012 proposed to levy AMT on all individual and non-corporate
tax assesse, who has claimed deduction under any section from 80H to 80RRB
(excluding 80P) and u/s 10AA. Series of amendments are proposed vide various
clauses of the Bill.
Clause 48 of the Bill proposed to
replace Section 115JC. Brief contents are as under:
· A.
Sub-section (1) starts
with notwithstanding words
o It
intends to compares normal tax on person other company with AMT.
o If
normal tax is lower than AMT, adjusted total income shall be deemed to be total
income of person other corporate
o Adjusted
total income would be subject to tax at 18 ½ per cent.
B. Sub-section (2) lays the method of
calculating adjusted total income, which is sum of
o total
income (without considering provision of AMT)
o income
based deductions claimed any section under chapter VI-A Part C ie from section
80H to 80RRB and
o deduction
claimed u/s 10AA ie units established in Special Economic Zones
C. Sub-section (3) requires such person
other corporate to obtain report in prescribed form, from accountant,
o Accountant
is required to certify computation of adjusted total income and AMT is as per
the provisions of the Act.
o Report
is required to be obtained on or before due date of filing of return u/s 139(1).
Clause 51
proposes to introduce new section 115JEE, giving exemption from applicability
of AMT. It provides that provision of AMT shall not apply to individual or a
Hindu undivided family or an association of persons or a body of individuals,
whether incorporated or not, or an artificial juridical person, if the adjusted
total income of such person does not exceed Rs 20 lakh.
Further
various other clauses have been introduced for consequential amendment in
various other section as under:
a.
Clauses 47 – proposes to amend chapter XII-BA
heading from “Special provisions
relating to certain Limited Liability Partnerships” to “Special provisions
relating to PERSONS OTHER THAN A COMPANY”
b.
Clause 49 – proposes to amend S. 115JD to provide
tax credit for alternate minimum tax to persons other than a company
c.
Clause 50 – proposes to amend S. 115JE to provide
that all other provisions of the Act shall apply to such person other than a
company.
d.
Clause 57 – proposes to amend various clauses
of S. 140A relating to payment of self-assessment tax.
e.
Clauses 82, 83 & 84 – proposes to amend
sections 234A, 234B & 234C. It provides that AMT credit u/s 115JD shall be
reduced from tax on total income determined as per the provisions of Act, for
the purposes of determining interest u/s 234A – late filing of return of
income, u/s 234B interest for default in payment of advance tax & u/s 234C
deferment of advance tax.
AMT
v/s MAT
AMT differs from MAT on various counts;
some of them are as under:
S. No.
|
Particulars
|
MAT
|
AMT
|
1
|
Applies to
|
Companies
|
Persons other than Companies
|
2
|
Trigger point
|
Having book-profit
|
Claiming specified deductions
|
3
|
Computation mode
|
Book-profit is adjusted with specified
adjustment
|
Total income is increased by specified
deduction
|
4
|
Preparation of profit & loss Accounts
|
Companies are required to prepare profit
& loss account as per the provision of Schedule VI
|
No such legal requirement
|
5
|
Allowance of depreciation
|
Depreciation is to be calculated at the rate
specified under Schedule XIII of Companies Act
|
Depreciation is to be calculated at the rate
specified under rule 5 of Income-tax rules.
|
6
|
Treatment of brought forward losses &
depreciation
|
Lower of brought forward losses or
depreciation as per books is allowed to be deducted from book-profit
|
Both brought forward loss and well as
brought forward depreciation (determined as per income-tax provisions), to be
deducted before carrying specified adjustment to total income
|
7
|
Long term capital gains exempt u/s 10(38)
|
MAT is applicable
|
AMT is not applicable
|
Illustration
Provisions of the amended chapter can
be better under stood with the help of following example:
X co has entered into Joint venture for
carrying certain infrastructure projects eligible for profit based incentive
u/s 80IA.
A)
Computation
of Income under normal provision of Act
Particulars
|
20x3
|
20x4
|
20x5
|
Gross Total income
|
19
|
1100
|
1400
|
Deduction u/s 80-IA
|
15
|
500
|
400
|
Total income
|
4
|
600
|
1000
|
Tax @ 30%
|
1.2
|
180
|
300
|
E. Cess @ 3%
|
0.036
|
5
|
9
|
Total Tax
|
1.236
|
185
|
309
|
B) Computation of Adjusted total Income
Particulars
|
20x3
|
20x4
|
20x5
|
Total Income
|
4
|
600
|
1000
|
Add: Deduction under Chapter VIA-C (from 80H
to 80RRB) & 10AA
|
15
|
500
|
400
|
Adjusted total Income
|
19
|
1100
|
1400
|
Alternate Minimum Tax @ 18½ %
|
0*
|
204
|
259
|
Education Cess @ 3%
|
|
6
|
8
|
Total
|
0
|
210
|
267
|
C) Computation of tax
Particulars
|
20x3
|
20x4
|
20x5
|
Normal Tax (a)
|
1.236
|
180
|
300
|
Alternate Minimum Tax (b)
|
NA
|
204
|
259
|
Taxed at Normal Rate (NR) or AMT
|
NR*
|
AMT
|
NR
|
Higher of (a) or (b)
|
1.236
|
204
|
300
|
Tax Due (including Education Cess)
|
1.236
|
210
|
309
|
Less Tax credit utilised
|
NIL
|
NIL
|
24
|
Tax Payable
|
1.236
|
210
|
284
|
* Since adjusted total income is less than Rs 20 lakh AMT is not
applicable
D) Computation of tax credit
Particulars
|
20x3
|
20x4
|
20x5
|
Tax credit brought forward & available
for utilisation
|
NIL
|
NIL
|
24
|
Maximum amount upto which AMT credit can be
availed
Normal tax (–) AMT excluding Education Cess
|
|
|
41
|
|
|
(300-259)
|
Tax Credit can be availed limited to actual
credit
|
NIL
|
NIL
|
24
|
Tax credit allowed to be carried forward
|
NIL
|
24
|
NIL
|
|
|
(204-180)
|
(24-24)
|
Proposed introduction of AMT will
fasten higher rate of tax on any assesee who earns income which is subject to special
lower rate of tax ie less than 18½ %, even though such income is not entitled
for specified deduction. Further individual,
HUF, and at times AOP & BOI are charged to slab rate of tax. AMT would take
away benefit of slab rates. To illustrate,
Particulars
|
Scenario 1
|
Scenario 2
|
Gross Total Income
|
19,99,900
|
20,00,100
|
Deduction u/s 80IA
|
15,00,000
|
15,00,000
|
Total Income
|
04,99,900
|
05,00,100
|
Adjusted Total Income
|
19,99,900
|
20,00,100
|
Tax on Normal Rate
|
29,990
|
30,030
|
AMT
|
NIL
|
3,70,119
|
Tax liability without considering deduction u/s
80IA
|
|
4,30,030
|
In the above example it may be
observed that under scenario 2 increase of income by Rs 200, assesse is subject
to increase tax by Rs 3,40,089 and benefit of slab rate is lost. In such
scenario it is suggested to introduce marginal relief and income subject to
special lower rate of tax eg short term capital gains on listed securities
etc., should also be excluded while computing Adjusted Total Income.
Initially Government has provided
various tax breaks to encourage certain industries in specified areas or
certain type of industries, which is to be availed in specified number of
years. Hence, questions may arise whether specified industries have been
matured well before expected time or where India has achieved target
industrialisation? Further is it fair to provide exemption on one hand and
withdraw it on other hand?
(Extracts from the article published in Income Tax Review April 2012 Issue)
